Universal Electronics Inc. (UEI), (NASDAQ: UEIC) reported
financial results for the three and twelve months ended December
31, 2023.
Paul Arling, UEI’s chairman and CEO, said, “We are building for
a better future. During 2023, we successfully advanced our
transformation, increasing our focus in growth areas such as home
automation and climate control. We are executing our efficiency
initiatives, and our strong gross margins delivered better than
expected earnings per share for the fourth quarter of 2023. We
believe a more efficient factory footprint coupled with project
wins in the connected home channels will generate earnings growth
and full year profitability. Confident in our strategy and
long-term growth, we plan to continue our share repurchase
program.
“Furthermore, our intellectual property is being recognized. In
January 2024, the U.S. Court of Appeals for the Federal Circuit
affirmed a prior ruling by the U.S. International Trade Commission,
once again validating UEI’s valuable IP and confirming Roku’s
infringement of our patent. This decision supports us in returning
to the U.S. District Court to request judgment on monetary damages
regarding the infringing activities of Roku and its TV
partners.”
Financial Results for the Three Months
Ended December 31: 2023 Compared to 2022
- GAAP net sales were $97.6 million, compared to $122.8 million;
Adjusted Non-GAAP net sales were $97.6 million, compared to $122.8
million.
- GAAP gross margins were 28.5%, compared to 26.2%; Adjusted
Non-GAAP gross margins were 30.2%, compared to 30.7%.
- GAAP operating loss was $2.6 million, compared to $1.9 million;
Adjusted Non-GAAP operating income was $1.8 million, compared to
$8.3 million.
- GAAP net loss was $7.1 million, or $0.55 per share, compared to
$6.9 million, or $0.54 per share; Adjusted Non-GAAP net income was
$0.9 million, or $0.07 per diluted share, compared to $5.6 million,
or $0.44 per diluted share.
- At December 31, 2023, cash and cash equivalents were $42.8
million.
Financial Results for the Twelve Months
Ended December 31: 2023 Compared to 2022
- GAAP net sales were $420.5 million, compared to $542.8 million;
Adjusted Non-GAAP net sales were $420.5 million, compared to $542.8
million.
- GAAP gross margins were 23.2%, compared to 28.1%; Adjusted
Non-GAAP gross margins were 27.3%, compared to 29.9%.
- GAAP operating loss was $85.3 million, including a $49.1
million non-cash charge for goodwill impairment, which resulted
from a decline in the company’s market capitalization, compared to
GAAP operating income of $14.5 million; Adjusted Non-GAAP operating
loss was $0.8 million, compared to Adjusted Non-GAAP operating
income of $41.8 million.
- GAAP net loss was $98.2 million, including the aforementioned
non-cash charge, or $7.64 per share, compared to GAAP net income of
$0.4 million, or $0.03 per diluted share; Adjusted Non-GAAP net
loss was $2.3 million, or $0.18 per share, compared to Adjusted
Non-GAAP net income of $32.7 million, or $2.56 per diluted
share.
Financial Outlook
For the first quarter of 2024, the company expects GAAP net
sales to range between $86 million and $96 million, compared to
$108.4 million in the first quarter of 2023. GAAP loss per share
for the first quarter of 2024 is expected to range from $0.88 to
$0.78, compared to a GAAP loss per share of $4.81 in the first
quarter of 2023.
For the first quarter of 2024, the company expects Adjusted
Non-GAAP net sales to range between $86 million and $96 million,
compared to $108.4 million in the first quarter of 2023. Adjusted
Non-GAAP loss per share is expected to range from $0.27 to $0.17
compared to Adjusted Non-GAAP loss of $0.28 per share in the first
quarter of 2023. The first quarter 2024 Adjusted Non-GAAP loss per
share estimate excludes $0.61 per share related to, among other
things, excess manufacturing overhead costs, stock-based
compensation, amortization of acquired intangibles, litigation
costs, foreign currency gains and losses and the related tax impact
of these adjustments. For a more detailed explanation of Non-GAAP
measures, please see the Use of Non-GAAP Financial Metrics
discussion, the Reconciliation of Adjusted Non-GAAP Financial
Results and the Reconciliation of Adjusted Non-GAAP Financial
Outlook and Financial Results, each located elsewhere in this press
release.
Conference Call
Information
UEI’s management team will hold a conference call today,
Thursday, February 15, 2024 at 4:30 p.m. ET / 1:30 p.m. PT, to
discuss its fourth quarter and full year 2023 earnings results,
review recent activity and answer questions. To attend the call
please register at here to receive a computer-generated dial-in
number and a unique pin number. The conference call will also be
broadcast live on the investor section of the UEI website where it
will be available for replay for 90 days.
Use of Non-GAAP Financial
Metrics
In addition to reporting financial results in accordance with
generally accepted accounting principles, or GAAP, UEI provides
Adjusted Non-GAAP information as additional information for its
operating results. References to Adjusted Non-GAAP information are
to non-GAAP financial measures. These measures are not required by,
in accordance with, or an alternative for, GAAP and may be
different from non-GAAP financial measures used by other companies.
UEI’s management uses these measures for reviewing the financial
results of UEI for budget planning purposes and for making
operational and financial decisions. Management believes that
providing these non-GAAP financial measures to investors, as a
supplement to GAAP financial measures, help investors evaluate
UEI’s core operating and financial performance and business trends
consistent with how management evaluates such performance and
trends. Additionally, management believes these measures facilitate
comparisons with the core operating and financial results and
business trends of competitors and other companies.
Adjusted Non-GAAP net sales is defined as net sales. Adjusted
Non-GAAP gross profit is defined as gross profit excluding the
impact of excess manufacturing overhead costs, factory transition
costs, impairment, stock-based compensation expense and
depreciation expense related to the increase in fixed assets from
cost to fair market value resulting from acquisitions. Adjusted
Non-GAAP operating expenses are defined as operating expenses
excluding stock-based compensation expense, amortization of
intangibles acquired, costs associated with certain litigation
efforts, goodwill impairment, impairment, factory restructuring
costs and severance. Adjusted Non-GAAP net income is defined as net
income excluding the aforementioned items, foreign currency gains
and losses, the related tax effects of all adjustments, as well as
a valuation allowance on certain deferred tax assets. Adjusted
Non-GAAP earnings (loss) per diluted share is calculated using
Adjusted Non-GAAP net income. A reconciliation of these financial
measures to the most directly comparable GAAP financial measures is
included at the end of this press release.
About Universal
Electronics
Universal Electronics Inc. (NASDAQ: UEIC) is the global leader
in wireless universal control solutions for home entertainment and
smart home devices and designs, develops, manufactures, ships and
supports hardware and software control and sensor technology
solutions. UEI partners with many Fortune 500 customers, including
Comcast, Vivint Smart Home, Samsung, LG, Sony and Daikin to serve
video, telecommunications, security service providers, television,
smart home and HVAC system manufacturers. For over 37 years, UEI
has been pioneering breakthrough innovations such as voice control
and QuickSet cloud, the world's leading platform for automated
set-up and control of devices in the home. For more information,
visit www.uei.com.
Forward-looking
Statements
This press release and accompanying schedules contain
"forward-looking statements" within the meaning of federal
securities laws, including net sales, profit margin and earnings
trends, estimates and assumptions; our expectations about new
product introductions; and similar statements concerning
anticipated future events and expectations that are not historical
facts. We caution you that these statements are not guarantees of
future performance and are subject to numerous risks and
uncertainties, including those we identify below and other risk
factors that we identify in our annual report on Form 10-K for the
year ended December 31, 2022 and the periodic reports filed and
furnished since then. Risks that could affect forward-looking
statements in this press release include: our continued ability to
timely develop and deliver products and technologies that will be
accepted by our customers, both near- and long-term; our ability to
attract new customers and to successfully capture sales in all
markets we serve, including in the home automation, climate
control, and connected home markets as anticipated by management;
our ability to continue optimizing our manufacturing footprint and
realize the lower concentration risks in the time frame and to the
extent expected by management; the slowdown of the traditional
subscription broadcast market dissipating as expected by
management, our ability to manage through the supply chain
constraints, inflationary pressures and macroeconomic conditions,
including continued lower consumer spending; the continued
commitment of our customers to their product development and
ordering strategies and patterns that translate into greater demand
for our technologies and products as anticipated by management; our
ability to continue to manage our business, inventories and cash
flows to achieve our net sales, margins and earnings through
financial discipline, operational efficiency, product line
management, liquidity requirements, capital expenditures and other
investment spending expectations, including our ability to execute
on our stock repurchase programs; the Company’s continued ability
to successfully enforce its patented technology against Roku; the
continued fluctuation in our market capitalization; the direct and
indirect impact we may experience with respect to our business and
financial results and management’s ability to anticipate and
mitigate the impact stemming from the continued economic
uncertainty affecting consumers’ confidence and spending, natural
disasters or other events beyond our control, public health crises
(including an outbreak of infectious disease), governmental
actions, including the effects of political unrest, war, terrorist
activities, or other hostilities; the effects and uncertainties and
other factors more fully described in our reports filed with the
SEC; and the effects that changes in or enhanced use of laws,
regulations and policies may have on our business including the
impact of trade regulations pertaining to importation of our
products. Since it is not possible to predict or identify all of
the risks, uncertainties and other factors that may affect future
results, the above list should not be considered a complete list.
Further, any of these factors could cause actual results to differ
materially from the expectations we express or imply in this press
release. We make these forward-looking statements as of February
15, 2024, and we undertake no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
– Tables Follow –
UNIVERSAL ELECTRONICS
INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except
share-related data)
(Unaudited)
December 31, 2023
December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents
$
42,751
$
66,740
Accounts receivable, net
112,596
112,346
Contract assets
4,240
7,996
Inventories
88,273
140,181
Prepaid expenses and other current
assets
7,325
6,647
Income tax receivable
3,666
4,130
Total current assets
258,851
338,040
Property, plant and equipment, net
44,619
62,791
Goodwill
—
49,085
Intangible assets, net
25,349
24,470
Operating lease right-of-use assets
18,693
21,599
Deferred income taxes
6,787
6,242
Other assets
1,573
1,936
Total assets
$
355,872
$
504,163
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
57,033
$
71,373
Line of credit
55,000
88,000
Accrued compensation
20,305
20,904
Accrued sales discounts, rebates and
royalties
5,796
6,477
Accrued income taxes
1,833
5,585
Other accrued liabilities
21,181
24,134
Total current liabilities
161,148
216,473
Long-term liabilities:
Operating lease obligations
12,560
15,027
Deferred income taxes
1,992
2,724
Income tax payable
435
723
Other long-term liabilities
817
810
Total liabilities
176,952
235,757
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value,
5,000,000 shares authorized; none issued or outstanding
—
—
Common stock, $0.01 par value, 50,000,000
shares authorized; 25,346,383 and 24,999,951 shares issued on
December 31, 2023 and 2022, respectively
253
250
Paid-in capital
336,938
326,839
Treasury stock, at cost, 12,459,845 and
12,295,305 shares on December 31, 2023 and 2022, respectively
(369,973
)
(368,194
)
Accumulated other comprehensive income
(loss)
(20,758
)
(21,187
)
Retained earnings
232,460
330,698
Total stockholders’ equity
178,920
268,406
Total liabilities and stockholders’
equity
$
355,872
$
504,163
UNIVERSAL ELECTRONICS
INC.
CONSOLIDATED INCOME
STATEMENTS
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Net sales
$
97,594
$
122,758
$
420,457
$
542,751
Cost of sales
69,756
90,547
322,897
390,459
Gross profit
27,838
32,211
97,560
152,292
Research and development expenses
6,779
7,992
31,281
32,452
Factory restructuring charges
325
—
4,015
—
Selling, general and administrative
expenses
23,346
26,104
98,490
105,292
Goodwill impairment
—
—
49,075
—
Operating income (loss)
(2,612
)
(1,885
)
(85,301
)
14,548
Interest income (expense), net
(1,044
)
(1,053
)
(4,332
)
(2,200
)
Other income (expense), net
(854
)
(567
)
(2,621
)
(955
)
Income (loss) before provision for income
taxes
(4,510
)
(3,505
)
(92,254
)
11,393
Provision for income taxes
2,592
3,400
5,984
10,986
Net income (loss)
$
(7,102
)
$
(6,905
)
$
(98,238
)
$
407
Earnings (loss) per share:
Basic
$
(0.55
)
$
(0.54
)
$
(7.64
)
$
0.03
Diluted
$
(0.55
)
$
(0.54
)
$
(7.64
)
$
0.03
Shares used in computing earnings (loss)
per share:
Basic
12,902
12,686
12,855
12,703
Diluted
12,902
12,686
12,855
12,779
UNIVERSAL ELECTRONICS
INC.
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(In thousands)
(Unaudited)
Year Ended December
31,
2023
2022
Cash flows from operating activities:
Net income (loss)
$
(98,238
)
$
407
Adjustments to reconcile net income (loss)
to net cash provided by (used for) operating activities:
Depreciation and amortization
22,927
24,033
Provision for credit losses
70
(182
)
Deferred income taxes
(1,149
)
1,377
Shares issued for employee benefit
plan
1,293
1,199
Employee and director stock-based
compensation
8,809
10,013
Impairment of goodwill
49,075
—
Impairment of long-lived assets
7,963
2,888
Changes in operating assets and
liabilities:
Accounts receivable and contract
assets
5,040
12,765
Inventories
51,458
(9,913
)
Prepaid expenses and other assets
2,860
(917
)
Accounts payable and accrued
liabilities
(21,379
)
(28,670
)
Accrued income taxes
(3,539
)
(2,074
)
Net cash provided by (used for) operating
activities
25,190
10,926
Cash flows from investing activities:
Purchase of term deposit
—
(7,487
)
Redemption of term deposit
—
7,803
Acquisition of net assets of Qterics,
Inc.
—
(939
)
Acquisitions of property, plant and
equipment
(8,116
)
(14,006
)
Acquisitions of intangible assets
(5,761
)
(6,579
)
Net cash provided by (used for) investing
activities
(13,877
)
(21,208
)
Cash flows from financing activities:
Borrowings under line of credit
78,000
133,000
Repayments on line of credit
(111,000
)
(101,000
)
Proceeds from stock options exercised
—
1,536
Treasury stock purchased
(1,779
)
(13,035
)
Net cash provided by (used for) financing
activities
(34,779
)
20,501
Effect of foreign currency exchange rates
on cash and cash equivalents
(523
)
(4,292
)
Net increase (decrease) in cash and cash
equivalents
(23,989
)
5,927
Cash and cash equivalents at beginning of
period
66,740
60,813
Cash and cash equivalents at end of
period
$
42,751
$
66,740
Supplemental cash flow information:
Income taxes paid
$
13,176
$
10,922
Interest paid
$
7,015
$
2,214
UNIVERSAL ELECTRONICS
INC.
RECONCILIATION OF ADJUSTED
NON-GAAP FINANCIAL RESULTS
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Net sales:
Net sales - GAAP
$
97,594
$
122,758
$
420,457
$
542,751
Adjusted Non-GAAP net sales
$
97,594
$
122,758
$
420,457
$
542,751
Cost of sales:
Cost of sales - GAAP
$
69,756
$
90,547
$
322,897
$
390,459
Excess manufacturing overhead and factory
transition costs (1)
(1,539
)
(2,549
)
(9,108
)
(6,670
)
Impairment of long-lived assets (2)
—
(2,868
)
(7,723
)
(2,868
)
Stock-based compensation expense
(32
)
(38
)
(125
)
(155
)
Adjustments to acquired tangible assets
(3)
(60
)
(60
)
(241
)
(241
)
Adjusted Non-GAAP cost of sales
68,125
85,032
305,700
380,525
Adjusted Non-GAAP gross profit
$
29,469
$
37,726
$
114,757
$
162,226
Gross margin:
Gross margin - GAAP
28.5
%
26.2
%
23.2
%
28.1
%
Excess manufacturing overhead and factory
transition costs (1)
1.6
%
2.1
%
2.2
%
1.2
%
Impairment of long-lived assets (2)
—
%
2.3
%
1.8
%
0.5
%
Stock-based compensation expense
0.0
%
0.0
%
0.0
%
0.0
%
Adjustments to acquired tangible assets
(3)
0.1
%
0.1
%
0.1
%
0.1
%
Adjusted Non-GAAP gross margin
30.2
%
30.7
%
27.3
%
29.9
%
Operating expenses:
Operating expenses - GAAP
$
30,450
$
34,096
$
182,861
$
137,744
Stock-based compensation expense
(1,945
)
(2,401
)
(8,684
)
(9,858
)
Amortization of acquired intangible
assets
(281
)
(281
)
(1,137
)
(1,153
)
Litigation costs (4)
(83
)
(2,004
)
(1,687
)
(6,268
)
Goodwill impairment (5)
—
—
(49,075
)
—
Impairment of long-lived assets (2)
—
—
(100
)
—
Factory restructuring charges (6)
(325
)
—
(4,015
)
—
Severance (7)
(180
)
—
(2,635
)
—
Adjusted Non-GAAP operating expenses
$
27,636
$
29,410
$
115,528
$
120,465
Operating income (loss):
Operating income (loss) - GAAP
$
(2,612
)
$
(1,885
)
$
(85,301
)
$
14,548
Excess manufacturing overhead and factory
transition costs (1)
1,539
2,549
9,108
6,670
Impairment of long-lived assets (2)
—
2,868
7,823
2,868
Stock-based compensation expense
1,977
2,439
8,809
10,013
Adjustments to acquired tangible assets
(3)
60
60
241
241
Amortization of acquired intangible
assets
281
281
1,137
1,153
Litigation costs (4)
83
2,004
1,687
6,268
Goodwill impairment (5)
—
—
49,075
—
Factory restructuring costs (6)
325
—
4,015
—
Severance (7)
180
—
2,635
—
Adjusted Non-GAAP operating income
(loss)
$
1,833
$
8,316
$
(771
)
$
41,761
Adjusted Non-GAAP operating income (loss)
as a percentage of net sales
1.9
%
6.8
%
(0.2
) %
7.7
%
UNIVERSAL ELECTRONICS
INC.
RECONCILIATION OF ADJUSTED
NON-GAAP FINANCIAL RESULTS
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Net income (loss):
Net income (loss) - GAAP
$
(7,102
)
$
(6,905
)
$
(98,238
)
$
407
Excess manufacturing overhead and factory
transition costs (1)
1,539
2,549
9,108
6,670
Impairment of long-lived assets (2)
—
2,868
7,823
2,868
Stock-based compensation expense
1,977
2,439
8,809
10,013
Adjustments to acquired tangible assets
(3)
60
60
241
241
Amortization of acquired intangible
assets
281
281
1,137
1,153
Litigation costs (4)
83
2,004
1,687
6,268
Goodwill impairment (5)
—
—
49,075
—
Factory restructuring costs (6)
325
—
4,015
—
Severance (7)
180
—
2,635
—
Foreign currency (gain) loss
1,258
1,075
3,501
1,091
Income tax provision on adjustments
2,317
1,277
6,517
4,035
Other income tax adjustments (8)
—
—
1,377
—
Adjusted Non-GAAP net income (loss)
$
918
$
5,648
$
(2,313
)
$
32,746
Diluted shares used in computing
earnings (loss) per share:
GAAP
12,902
12,686
12,855
12,779
Adjusted Non-GAAP
12,933
12,729
12,855
12,779
Diluted earnings (loss) per
share:
Diluted earnings (loss) per share -
GAAP
$
(0.55
)
$
(0.54
)
$
(7.64
)
$
0.03
Total adjustments
$
0.62
$
0.99
$
7.46
$
2.53
Adjusted Non-GAAP diluted earnings (loss)
per share
$
0.07
$
0.44
$
(0.18
)
$
2.56
(1)
The three and twelve months ended December
31, 2023 and 2022 include unabsorbed manufacturing overhead costs
resulting from the expansion of our manufacturing facility in
Mexico where products destined for the U.S. market are
manufactured, exacerbated by a subsequent decline in production
volume. These products destined for the U.S. market were previously
manufactured in China. The three and twelve months ended December
31, 2023 also include manufacturing inefficiencies associated with
our new Vietnam factory which commenced operations in the latter
part of June 2023. In addition, in the twelve months ended December
31, 2023 and the three and twelve months ended December 31, 2022,
we incurred normal start-up costs such as idle labor and training
associated with the Vietnam factory prior to its commencement.
(2)
The twelve months ended December 31, 2023
include impairment charges relating to machinery and equipment and
leasehold improvements associated with the closure of our
southwestern China factory, which ceased operations in September
2023. In addition, we also incurred impairment charges relating to
machinery and equipment at our Mexico factory as we are reducing
its capacity due to lower demand. The three and twelve months ended
December 31, 2022 include impairment charges incurred related to
the underutilization of fixed assets in our Mexico factory.
(3)
Consists of depreciation related to the
mark-up from cost to fair value of fixed assets acquired in
business combinations.
(4)
Consists of expenses related to our
various litigation matters involving Roku, Inc. and certain other
related entities including three Federal District Court cases, two
International Trade Commission investigations and the defense of
various inter partes reviews and appeals before the US Patent and
Trademark Board as well as other non-recurring legal matters.
(5)
During the twelve months ended December
31, 2023, we recorded a goodwill impairment charge of $49.1 million
as a result of our market capitalization being significantly less
than the carrying value of our equity.
(6)
The three and twelve months ended December
31, 2023 include severance and equipment moving costs associated
with the closure of our southwestern China factory.
(7)
The three and twelve months ended December
31, 2023 include severance costs associated with a reduction in
headcount at our corporate offices.
(8)
The twelve months ended December 31, 2023
includes a $1.4 million valuation allowance recorded against the
deferred tax assets at our southwestern China entity as a result of
its closure.
UNIVERSAL ELECTRONICS
INC.
RECONCILIATION OF ADJUSTED
NON-GAAP FINANCIAL OUTLOOK AND FINANCIAL RESULTS
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended March
31,
2024
2023
Low Range
High Range
Actual
Net sales:
Net sales - GAAP
$
86,000
$
96,000
$
108,377
Total adjustments (1)
—
—
—
Adjusted Non-GAAP net sales
$
86,000
$
96,000
$
108,377
Loss per share:
Loss per share - GAAP
$
(0.88
)
$
(0.78
)
$
(4.81
)
Total adjustments (2)
$
0.61
$
0.61
$
4.54
Adjusted Non-GAAP loss per share
$
(0.27
)
$
(0.17
)
$
(0.28
)
(1)
The three months ended March 31, 2024 and
2023 do not include any Non-GAAP adjustments to net sales.
(2)
The three months ended March 31, 2024 and
2023 includes adjustments for excess manufacturing overhead costs,
factory transition costs, stock-based compensation expense,
depreciation expense related to the increase in fixed assets from
cost to fair market value resulting from acquisitions, amortization
of acquired intangibles, costs associated with certain litigation
efforts, foreign currency gains and losses and the related tax
impact of these adjustments. The three months ended March 31, 2023
also includes adjustments for goodwill impairment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240215442075/en/
Paul Arling, Chairman & CEO, UEI, 480-530-3000 Investors:
Kirsten Chapman, LHA Investor Relations, uei@lhai.com,
415-433-3777
Universal Electronics (NASDAQ:UEIC)
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